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1963 DIGILAW 120 (KER)

STATE OF KERALA v. RAMACHANDRAN NAIR

1963-04-05

P.GOVINDA NAIR, T.K.JOSEPH

body1963
Judgment :- 1. These appeals are by the State of Kerala, the defendant in O. S. No. 127 of 1952 of the Subordinate Judge's Court, Trivandrum. A. S. No. 46 of 1960 is from the decree, dated 31st March 1959 and CM A. No. 6 of 1960 is from the order passed In the above suit on the same day rejecting the objections of the appellant to the award of the arbitrators. The respondent in the two appeals is the plaintiff in the suit. . 2. The only question arising for decision in these appeals is whether the award passed by the arbitrators on the 22nd of April 1957 is liable to be set aside on the ground that the two arbitrators who gave an unanimous decision had misconducted themselves or the proceedings. The appellant takes the stand that there is misconduct and that the award is liable to be set aside under clause (a) of S, 30 of the Arbitration Act, 1940. It is admitted that clauses (b) and (c) of S.30 of the Arbitration Act have no application. The court below negatived this contention and accepted the award. 3. The Registrar of the High Court of Travancore entered into an agreement, Ext. P 7, dated 28th February 1947, with the respondent for the printing of the records of the High Court and judgments and orders of the Subordinate Courts, Pursuant to this agreement, the respondent commenced the printing of the records and continued to do so till the 1st of July 1949. On that day, the two States of Travancore and Cochin pursuant to the Covenant entered into by the two Rulers of the States merged, to form a new (b) that the contrast evidenced by Ext. P-7 got discharged by frustration; (c) that the arbitrators misconstrued the terms of Ext. P-7 and that they failed to note that the contract, Ext. P--7 is subject to R.574 of the Civil Courts Guide, 1944; and (d) that the contract, Ext. P-7, is not binding on the State because Ext. P-7 was entered into by the Registrar of the High Court of Travancore who, according to the appellant, had no authority to enter into a contract binding on the Government. 5. These contentions have been repeated before us by the learned Advocate-General who appeared for the appellant. We will deal first with objections (c) and (d) stated above. P-7 was entered into by the Registrar of the High Court of Travancore who, according to the appellant, had no authority to enter into a contract binding on the Government. 5. These contentions have been repeated before us by the learned Advocate-General who appeared for the appellant. We will deal first with objections (c) and (d) stated above. There is no substance in either of these contentions. Ext. P-7 specifically states in Clause.12 that the agreement shall be in force for a period of ten years from the commencement of the work. R.574 of the Civil Courts Guide provides that contracts entered into for the purpose of printing records shall be terminable at will on one month's notice by either side. We do not think that we should refer to this Rule at all in the light of the pleadings. There is a specific averment in Para.5 of the plaint that the contract was to subsist for ten years and that it is not terminable during that period except in case of default contemplated in Clause.8 of Ext. P-7. Though two written statements were filed by the appellant, one on 13th January 1953 and another on 3rd September 1953, no contention was raised that the period of ten years is untenable. Notwithstanding the absence of a plea that the ten years' term is untenable, the arbitrators framed an issue relating to this contention, considered the question and came to the conclusion that the term of ten years embodied in Ext. P-7 is an essential term of the contract necessitated by the exigencies of the situation and it was within the discretion of the High Court to enter into a contract with such a term. The sanction accorded by the State to the proposal made by the respondent, Ext. P-6, was relied on to show that the contract was subject to the provisions of the Civil Courts Guide and, therefore, subject to R.574. In the light of the specific provision in Ext. P-7 that the agreement was to endure for a period of ten years, this contention is untenable and we do not think that the arbitrators erred in any manner in construing Ext. P-6 as providing that the respondent will be bound by the Rule's of the Civil Courts Guide only in regard to the matter of printing and transmission of records. 6. P-6 as providing that the respondent will be bound by the Rule's of the Civil Courts Guide only in regard to the matter of printing and transmission of records. 6. The plea that the Registrar was incompetent to enter into a contract stipulating a term often years was not raised even before the arbitrators. Needless to say that they could not have misconducted themselves or the proceedings in not considering that plea. 7. Passing on to the first of the main contentions raised by the learned Advocate-General, there can be no doubt that the covenant entered into by the Rulers of Travancore and Cochin for the formation of the United State of Travancore and Cochin constituted an act of State. The respondent will not, therefore, be justified in placing any reliance on Art.3 (b) of that Covenant which provides that: "all duties and obligations of the Ruler of either of the Covenanting States pertaining or incidental to the Government of that State shall devolve on the United State, and shall be discharged by it". This position cannot be assailed. The Supreme Court has pronounced on the subject more than once. It will be sufficient to refer to two of those decisions, one in Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income-tax AIR. 1958 SC. 816, and the other in Promod Chandra Deb v. The State of Orissa AIR. 1962 SC. 1288. 8. But at no relevant time in the proceedings was this point raised by the State. There is no such plea in the two written statements tiled in answer to the plaint. No such point was taken before the arbitrators. And. the two objections taken to the award on 27th May 1957 and 5th October 1957 do not contain any such contention. Notwithstanding the missing of five opportunities, the State did not hesitate to argue before the learned Subordinate Judge that the respondent was trying to enforce Art.3 of the Covenant and that he is not entitled to do so because the Covenant embodied an act of State. The learned Subordinate Judge dealt with this argument and found against the appellant. Notwithstanding the missing of five opportunities, the State did not hesitate to argue before the learned Subordinate Judge that the respondent was trying to enforce Art.3 of the Covenant and that he is not entitled to do so because the Covenant embodied an act of State. The learned Subordinate Judge dealt with this argument and found against the appellant. We are inclined to think that the learned Subordinate Judge would have been perfectly justified in refusing to consider this belated defence which was raised for the first time in arguments., We, however, do not desire to stultify the appellant on this score and we would, therefore, consider whether there is any force in this defence. 9. On the day on which the United State of Travancore and Cochin was formed, the 1st of July, 1949, an Ordinance was promulgated by the Raj Pramukh of the United State of Travancore and Cochin, Ordinance I of 1124. The Raj Pramukh who promulgated that Ordinance was the Ruler of the Travancore State and the Sovereign of that State and one of the contracting parties to the Covenant. S.7 (b) of that Ordinance provided that the formation of the United State shall not affect any right, privilege, obligation or liability acquired, accrued or incurred prior to the appointed day. There is further provision in the same section that the formation of the United State shall not affect any penalty, forfeiture or punishment incurred in respect of any offence committed against the existing laws of Travancore or against the existing laws of Cochin prior to the appointed day, viz., 1st July 1949, and that the formation of the United State shall not affect any investigation, legal, proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid and that such investigation, legal proceedings or remedy may be instituted, continued or enforced in the United State and any such penalty, forfeiture or punishment may be imposed as if the United State had not been formed. These provisions, we think, by necessary implication provide that the law enacted by this Ordinance shall be binding on the State, S.3 and 4 of the Ordinance provided that the existing laws of Travancore and Cochin will continue to be in force in the respective portions of the territories of the United State which before the appointed day formed the territory of the State of Travancore and the territory of the State of Cochin. By these provisions, contracts entered to between the citizens of the State of Travancore and between the citizens of the State of Cochin became enforceable by the application of the laws that were in force in the two States. S.7 contains the further provision for making those laws binding on the United State of Travancore and Cochin. 10. The provisions of S.7 are in accordance with the pattern that has been followed at the time of the merger of the Princely States in India, the formation of the Part B States with the advent of the Constitution, and at the time of the reorganisation of the States that took place on the 1st of November 1956. The United State of Travancore and Cochin became the Part B State of Travancore-Cochin when the Raj Pramukh of the United State of Travancore and Cochin acceded to the Constitution. This accession is an act of State. And in order that the former citizens of the United State of Travancore and Cochin may continue to exercise the rights that they had as citizens of the United State of Travancore and Cochin and may continue to have the privileges and remedies which they had even against the new State provision was made in Art.295(2) of the Constitution that the Government of each State specified in Part B of the First Schedule shall, as from the commencement of the Constitution, be the successor of the Government of the corresponding Indian State as regards all property and assets and all rights, liabilities and obligations, whether arising out of any contract or otherwise, other than those referred to in clause (1) of Article.295. The contracts referred to in clause (1) of Art.295 of the Constitution are not material for the purpose of this case. The contracts referred to in clause (1) of Art.295 of the Constitution are not material for the purpose of this case. Again, when the reorganisation of the States took place and Pari B States were abolished and the Part B State of Travancore and Cochin merged with the Kerala State, provision was made in S.87, 88 and 91 of the States Reorganisation Act with the same object. We think that S.7 (b) of Ordinance I of 1124 is intended to serve a similar purpose. 11. An act of State derives its authority not from a municipal law but from ultralegal or supra-legal means (Vide Promod Chandra Deb v. The State of Orissa AIR. 1962 SC. 1288). Can it be said that the United State of Travancore and Cochin intended that it should treat the Covenant entered into between the sovereigns of the States of Travancore and Cochin as a pure act of State deriving authority from the ultra-legal or supra-legal means and should continue to be one such and that the former citizens of the State of Travancore and Cochin, should therefore, be treated as aliens to the United State. There can be no act of State against its own citizens. 12. A new State formed, as in this case, on the basis of a covenant may do one of three things. It may remain quiet without giving any indication as to whether it will honour the obligations which were the obligations of the States that integrated, or it may repudiate such obligations specifically. Thirdly it may affirm the obligations. The decision of the Supreme Court in Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income-tax AIR. 1958 SC. 816 illustrates a case falling under the third, a new State affirming the obligations of a former State. Jagannath Agarwala v. State of Orissa AIR. 1961 SC. 1361 is a, case where the new State repudiated the obligations of its predecessor. 13. There is nothing to indicate that the United State of Travancore & Cochin repudiated the obligations of the former States of Travancore & Cochin. The question is, can it be said that the United State of Travancore and Cochin "firmed those obligations. His Lordship Justice Venkatarama Ayyar was writing the leading judgment in the decision in Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income-tax AIR. 1958 SC. The question is, can it be said that the United State of Travancore and Cochin "firmed those obligations. His Lordship Justice Venkatarama Ayyar was writing the leading judgment in the decision in Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income-tax AIR. 1958 SC. 816 said: "If there were any acts of the new State which were equivocal in character it would have been possible to hold in the light of Art.6 of the Covenant that its intention was to affirm the concessions in Clause.23." Art. 6 referred to therein is Art.6 of the Covenant entered into by the Rulers of Faridkot, Jind, Kapurthala, Malerkotla, Nabha, Patiala, Kalsia & Nalagarh for the formation of Patiala and East Punjab States Union. Art. VI (c) of that Covenant provided that all the assets and liabilities of the covenanting State shall be the assets and liabilities of the Union. And Clause.23 is the clause in the agreement entered into between M/s. Dalmia Dadri Cement Co. Ltd. and the Ruler under an agreement, Ext. A (in that case), by which certain concessions were given to the Company. 14. From what is stated above, it is clear that the provision in Art.3 of the Covenant entered into between the Rulers of Travancore and Cochin can be referred to, to understand the acts of the new State, which may even be equivocal in character. 15. It is in the light of these principles that Art.3 of the Covenant and the provisions in Ordinance I of 1124 should be understood and construed. The Raj Pramukh who issued Ordinance I of 1124 was the Ruler of the State of Travancore who had solemnly covenanted with the Ruler of the State of Cochin to honour the obligations of the former State. Can it be said that he issued that Ordinance not to fulfil the solemn agreement that he entered into in the Covenant, but to repudiate it? And that the idea in forming the United State of Travancore and Cochin was to deny to the former citizens of Travancore and Cochin citizenship in the United State or to deprive them of their rights and privileges. What is envisaged appears to be the continuance of the good Government in accordance with the laws that were prevailing in the State of Travancore and Cochin. What is envisaged appears to be the continuance of the good Government in accordance with the laws that were prevailing in the State of Travancore and Cochin. Neither did the United State want to be in a position where they could not enforce contractual obligations of the former citizens of Travancore and Cochin in respect of contracts entered into by them with the Governments of the two States. Understood in this background, we feel no doubt that by S.7 (b) of Ordinance I of 1124, the United State of Travancore and Cochin assumed the obligations of the States of Travancore & Cochin. 16. A State is not bound by a statute unless it is so provided expressly or by necessary implication. (Director of Rationing and Distribution v. The Corporation of Calcutta AIR. 1960 SC. 1355). S.31 of the Interpretation and General Clauses Act (Act VII of 1125) reads: "No act shall in any manner whatsoever affect the rights of the Government unless it is therein expressly provided, or unless it appears by necessary implication that the Government is bound thereby." There is no express provision in Ordinance I of 1124 or in the statute which replaced it Act VI of 1125, that these statutes will be binding on the State. But by necessary implication the provision in S.7 of Ordinance I of 1124 and S.7 of Act VI of 1125 are binding on the United State of Travancore and Cochin. No point was made that if Ext. P-7 was binding on the United State of Travancore and Cochin, it would still not bind the Part B State of Travancore and Cochin or the Kerala State. We repel the contention that the appellant is not answerable for breach of the contract. 17. Assuming that Ext. P-7 agreement is binding on the appellant, it was next contended that the contract evidenced by Ext. P.7 has become frustrated by the formation of the High Court of the United State of Travancore and Cochin. This is a matter which was urged before the arbitrators and on which they have pronounced against the appellant. Normally this must conclude the appellant. P.7 has become frustrated by the formation of the High Court of the United State of Travancore and Cochin. This is a matter which was urged before the arbitrators and on which they have pronounced against the appellant. Normally this must conclude the appellant. But it is urged that in order to come within the rule that a decision of an arbitrator on a point of law is final, it must be shown that the point of law was specifically referred to him and that in a case where such a question is involved incidentally, as it is in this case, the opinion of the arbitrators will not be and cannot be final. Reliance for this proposition was placed on a number of rulings; but mainly the decision of the House of Lords reported in F. R. Absalom, Ltd. v. Great Western (London) Garden Village Society, Limited 1933 A. C. 592 was referred to. We will assume, without deciding, that it is open to the appellant to canvass in these proceedings the correctness of the view expressed by the arbitrators that there has been no frustration of the contract. Even so, it is clear, that the award of an arbitrator said to be bad on the basis of an error on the face thereof can be set aside only when in the award or in any document incorporated with it, there is found some legal proposition which is the basis of the award and which is erroneous. It was so held by the Supreme Court in Messrs. Alopi Parshad and Sons Ltd. v. Union of India AIR. 1960 SC. 588. The question is whether there is any such erroneous proposition of law which has formed the basis of the award. Three grounds have been relied on for contending that the contract has become frustrated. The location of the High Court of the United State of Travancore and Cochin at Ernakulam, the assumption by a court of jurisdiction over the area which formed the territory of the State of Cochin and the promulgation of rules for printing by the High Court of the United State of Travancore and Cochin. We are unable to see how all or any of these factors will enable the appellant to contend that the agreement, Ext. We are unable to see how all or any of these factors will enable the appellant to contend that the agreement, Ext. P-7, for the printing of the records of the High Court and judgments and orders of the Subordinate Courts has become frustrated. Even after the formation of the United State of Travancore and Cochin and the location of the High Court of the State at Ernakulam, the records had to be printed. What was demanded by the respondent and what was offered as seen from the correspondence which was exchanged between the respondent and the Registrar of the High Court of the United State of Travancore and Cochin, is the printing of the records pertaining to the cases arising from those territories of the United State of Travancore & Cochin which originally formed the territories of the former Travancore State. By the location of the High Court at Ernakulam (The Travancore High Court was situated at Trivandrum), it might have become a little more difficult for the respondent to discharge his obligations under Ext. P7. But even if the contract proves or turns out to bo more onerous than anticipated that will not be a ground for holding that the contract had become impossible of performance. The assumption of jurisdiction by the High Court of the United State of Travancore and Cochin over the area which was not within the jurisdiction of the Travancore High Court also does not touch the question. We are further unable to see how the promulgation of the rules of the High Court of the United State of Travancore and Cochin has in any manner affected the contract. Clause.6 of Ext. P-7 specifically provided that the respondent "shall obey all instructions laid down in the Civil Courts Guide and all other rules and orders that may be passed from time to time in respect of this matter of printing." 18. A passage from the judgment of Viscount Simonds in the decision in Tsakiroglou and Co. Ltd. v. Noblee Thorl G. M. B. H. (1961) II W. L. R.633 at 642 is apposite: "Nothing else remains to justify the view that the nature of the contract was 'fundamentally' altered. A passage from the judgment of Viscount Simonds in the decision in Tsakiroglou and Co. Ltd. v. Noblee Thorl G. M. B. H. (1961) II W. L. R.633 at 642 is apposite: "Nothing else remains to justify the view that the nature of the contract was 'fundamentally' altered. That is the woid used by Viscount Simon in British Movietones Ltd. v. London and District Cinemas Ltd. (1962 A. C. 166) and by my noble and learned friend Lord Reid in Davis Contractors Ltd. v. Fareham Urban District Council (1956 A. C. 696). In the latter case my noble and learned friend Lord Radcliffe used the expression 'radically different' and I think that the two expressions mean the same thing, as perhaps do other adverbs which have been used in this context. Whatever expression is used, I venture to say what I have said myself before and others more authoritatively have said before me; that the doctrine of frustration must be applied within very narrow limits. In my opinion this case falls far short of satisfying the necessary conditions." In Bam Kumar Agarwalla v. P. C. Roy and Go. (India) Ltd. AIR. 1952 Cal 397, it is said: "The real question is whether the event which has occurred is such and whether its relation to the contract is such, that a judge considering the contract and the surrounding circumstances must hold that it would not be just and reasonable to hold the parties any longer to the terms of the contract." 19. Wo are unable to discern any fundamental alteration in the nature of the contract. Nor are we able to say that the performance of the contract after the formation of the United State of Travancore and Cochin would be radically different from its performance before that date. It is neither just nor reasonable to hold on the facts of the case that subsequent events or circumstances have exonerated the parties from further performance of the contract. 20. And we are certainly not prepared to say that there is any proposition of law enunciated in the award which has formed the basis of the award and which is erroneous. Only if we are satisfied that there is any such error will we be justified in setting aside the award. (Vide Messrs. Alopi Parshad & Sons. Ltd. v. Union of India AIR. 1960 SC. 588.) 21. Only if we are satisfied that there is any such error will we be justified in setting aside the award. (Vide Messrs. Alopi Parshad & Sons. Ltd. v. Union of India AIR. 1960 SC. 588.) 21. In the view that we have taken that there is no frustration of the contract, it is unnecessary to consider the further question whether the frustration, if any, is one induced by the appellant. 22. There is a memo of objections relating to the costs denied to the respondent in the proceedings before the learned Judge. The claim of the respondent was for a sum of Rs. 1,70,000. What is awarded is only Rs. 47,500. In these circumstances, we do not consider that the direction of the learned Subordinate Judge regarding costs requires any interference. We reject the memo of objections. The other points in the memo of objections do not arise. 23. In the result, we dismiss A. S. No. 46 of 1960 and C. M. A. No. 6 of 1960 with costs to the respondent and we dismiss the memo of objections taken by the respondent, but without costs.